Tesla has lost its ‘products quality edge’ says CEO of GLJ Research

Electric vehicle maker Tesla (NASDAQ: TSLA) saw its Shanghai factory shut down for the better part of the first quarter, with the reduction in production capacity providing a significant headwind for delivery growth. 

Investors and analysts have been cutting expectations as a result, but Tesla still managed to miss its delivery forecast for Q2. Namely, the company managed to deliver 254,695 vehicles, which is down 17.9% compared to the Q1 of 2022 when the company delivered 310,048. 

Meanwhile, the Founder and CEO of GLJ Research, Gordon Johnson, was a guest on CNBC’s Squawk Box, and he pointed out that the Tesla bulls may be in trouble as the company is losing its product edge.   

“To see their deliveries down 18% in Q2 from Q1, by the way, which was flat; I think it’s a big disappointment. Look, I think objectively, Tesla has lost its product edge. There is a number of competitors out there who have similar or better real-world range. Better interior, similar or better-charging speed, and are just better quality.”

He also added:

“Consumer reports rank Tesla second-to-last in quality, and the British consumer outfit questionnaire says they have among the least reliable car. So, I think the fact they lost their products quality edge, their deliveries are declining; we’ve talked about their market share in China dropping from 17% to 10%, market share in Europe falling from 30% to 15%. But I think these delivery numbers being down, are a big problem for the bulls.”   

TSLA chart and analysis

Meanwhile, TSLA shares are trading in the range of $620 and $755, closing slightly above 20-day Simple Moving Averages (SMAs) in the last session. Trading volumes have declined compared to the highs seen towards the end of June, possibly indicating that the shares might remain range-bound.   

On the other hand, analysts rate the shares a moderate buy, with the average next 12 months price predictions at $867.41, 24.06% higher than the current trading price of $699.20.

It seems as if Tesla is being bombarded by bad news week in and week out; yet, the shares are staying range-bound for the moment. 

On the other hand, Gene Munster, Managing Partner at Loupfunds, offered a contrasting view of Tesla during the same interview, indicating that Tesla is a disruptive company that focuses on cars and solar.

“If you take a perspective that this is a disruptive company, that is going to have higher growth rates and a massive addressable market. I think you can get to the point where they can go from $70 billion to $400 billion in revenue over the next 5 years, just remarkable growth. Remember, Tesla does make cars, but it also makes solar, they’re also going to get into HVAC.”

He concluded:

“My point is, no other car company is doing this. So I think to be bound to think about this simply as a car company misses the bigger picture.”  

Increased scrutiny of Tesla vehicles and strong competition will bode well for the end-users of the products; however, for shareholders, it may spell trouble if the firm continues to disappoint on its promises. 

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